The Los Angeles Times from Los Angeles, California • Page 59

I.OS ANCIEI.ES times MONDAY, JANUARY (5, 1990 D5 Monday Report earn Cuisine Restaurants: Many Southland diners apparently have had their Fill. And that's creating indigestion for eatery owners in a saturated market, where business is down, costs are up and the competition is intense. By HARRY ANDERSON TIMES STAFF WRITER BUSINESS CENTER ble expectations that were raised by the Southland's restaurant boom of the mid-1980s. Because Southern Californians seemed to have insatiable appetites for new dining experiences, many new eating places from fast-food drive -throughs to five-star dinner houses opened. "Operators had visions of riches based on the increasing food awareness people had then," says Richard Martin, West Coast bureau chief of Nation's Restaurant News, a trade publication.

"Now there's more of an 'emperor-has-no-clothes' mentality. We're seeing down-scaling and revamping, recasting of restaurants in more casual modes and a targeting of a lower average check price." The trend has started to appear in other areas, particularly New York. But in Southern California, it has been more pronounced. Despite the apparent problems, however, Southern California's booming population and economy produced increased restaurant sales during 1989, according to a new study. But those sales are spread among more places, which has put a big squeeze on profits.

The accounting firm of Laventhol Horwath, which specializes in the restaurant and so-called hospitality industries, found in its study that although sales were up last year for the state's restaurants, profits were down. The median profit per sales dollar decreased to 6.8 in 1989 from 7.3 in 1987, according to the study. The toughest situation has developed for restaurants that have full liquor beverage service usually fancier, more expensive restaurants, according to Janet Lowder, Laventhol Horwath's manager of restaurant and food service consulting for the Southwest. "There is a trend away from drinking away from home," she says, "and cuts in tax deductions for business meals and credit card interest payments have reduced the market for expensive, open-tab lunches and dinners." Others say Southern California diners may simply be fed up with high prices, long waits and indifferent service negative factors that came with the 1980s restaurant boom. "I'm hearing a lot about dining out being too expensive," says Ron Salisbury, owner of the El Cholo and Sonora Cafe restaurants in Los Angeles.

"We haven't raised prices at El Cholo for three years because I'm extremely hesitant; before, we used to raise prices at least once a year." He adds that many of the baby boom generation who fueled the 1980s growth have had children in recent years, especially the married professional couples who often used to dine out three or four times a week. "People aren't going out as much because they have babies." Still, many of the Southland's established, successful restaurants are managing to do well, even though they are acutely aware of the situation. Spago, the West Hollywood restaurant whose celebrity owner and chef Wolfgang Puck was a major figure in the Southland restaurant boom of the 1980s, hasn't noticed a drop-off in business, according to Tom Kaplan, general manager. "We have definitely reached a restaurant saturation point in Los Angeles," Kaplan says. "It's harder to get repeat business and it requires extra effort to ensure the'quality of food and service, and especially to deliver the value that food -conscious diners are demanding." Because of the tough environment, some experts expect a shakeout if things don't improve soon.

"Within six months, you could see a lot of closures if something doesn't happen," Abbott says. "The well managed outlets that deliver quality and service will survive, but the marginal places and there are a lot of them may have to face the prospect of closing qr selling." MICHAEL HAERINO For The Times "We've got more food choices some would say too many food choices." Orris Abbott: MEMO These are dyspeptic days for the Southern California restaurant business. Only a few years ago, as local diners eagerly added everything from blackened redfish and angel hair pasta to charbroiled chicken and dim sum to their diets, Southland restaurateurs were in fat city. The number of eating places in the region rose by more than 20 during the 1980s, prices commanded by existing restaurants when they were sold went through the roof, chefs became celebrities and owners became millionaires. In fact, according to the U.S.

Census Bureau, the Los Angeles-Long Beach metropolitan area had more eating places in 1987 (the latest figures available) than did New York City. Los AngelesLong Beach, with an estimated population of 8.51 million, had 11,451 eating places with $5.8 billion in sales that year compared to 11,141 and $4.9 billion in sales for New York, with an estimated population of 8.53 million. Those days are gone. All but the most popular outlets are suffering from fewer customers, increased costs and much more competition. Although many say their weekend and holiday business remains strong, customer counts on weekdays have dropped significantly as much as 30 in some cases.

Meantime, sales of alcohol particularly hard liquor have declined, thus reducing one of the major profit producers for many restaurants, and many diners are opting for cheaper menu items or less expensive "light" dishes. Also cutting into business at. restaurants has been the trend by area supermarkets to add deli counters and salad bars. Although the softness in the restaurant business has become apparent only in the past six to eight months, many operators are already responding with tight cost controls, layoffs and price cuts. Perhaps the most dramatic evidence of the slump came from Michael's, a tony Santa Monica eatery that had the reputation for being perhaps the most expensive restaurant in Southern California.

Last month, owner Michael McCarty announced a 33 price cut in an effort to increase business, especially on weekdays. "We've got more food choices some would say too many food choices," says Orris Abbott, owner of The Restaurant Broker, a brokerage in Buena Park that specializes in selling eating places. "I don't believe that the average Southern Californi-an wants to sit down and enjoy a meal as much. We want to eat and get going; there are too many other things to do." Mort Farberow, who has operated Mort's Palisades Deli in Pacific Palisades for 11 years, has felt the pinch. "There's a saturation of restaurants in the area," he says.

"When I opened this place, there were only two other restaurants in the Palisades. Now there are 30, if you count the deli counters in the supermarkets." He's responded by clamping down on waste in the kitchen and raising prices. Part of the problem may have been unreasona Southland Restaurants Now, as the industry is retrenching and seeking ways to hold down costs, some observers see signs that interest by big corporations in Southland restaurants is waning. Already, Marriott Corp. has put up for sale the Bob's Big Boy chain, and Ramada Inns has sold the Marie Callender coffee shop chain.

"The chains just don't see the profits they once did," a restaurant broker says. "We're going to see more sales and the closure of unprofitable outlets." Although the Los Angeles-Long Beach area has by far the largest number of eating places in Southern California, the region has several large concentrations of restaurants, according to 1987 data compiled by the U.S. Census Bureau: As If fewer customers and increased competition weren't problems enough, restaurant operators in Southern California have another headache looming: smog control. The Air Quality Management District, seeking to reduce so-called stationary (non-automotive) sources of air pollution, is thinking of imposing stringent controls on charbroilers. Such a move would require that restaurants with such broilers obtain permits and install filters to reduce smoke and ash.

If adopted, the rule could take effect in the next few years. Charbroilers have become increasingly popular in the area as diners eat more fish and chicken cooked without deep frying. Unfortunately, the broilers spew out ash and food particles that contribute to air pollution, according to the AQMD. Restaurant industry officials worry that anti-pollution equipment will be so expensive that many small operators will not be able to continue using charbroilers. As the restaurant boom took hold in Southern California during the 1980s, major corporations spotted the profit potential and moved in.

Major restaurant chains were started, purchased or expanded: Denny's, Coco's and Sizzler, to name a few. Number of '87 sales Area eating places In billions Los Angeles-Long Beach 11,451 5.8 Anaheim-Santa Ana 3,614 1.98 San Diego 3,186 1.56 Riverside-San Bernardino 2,580 1.2 Oxnard-Ventura 828 037 By comparison, the New York City area had 11,141 eating places, with $4.9 billion in sales; Chicago had 8,092, with sales of $3.95 billion; San Francisco had 3,553, with sales of $1.78 billion, and Oakland had 2,883 with sales of $1.26 billion. -HARRY ANDERSON Liquor License Has Lost Luster for Restaurants Tt used to be that a restaurant in Southern I 1 dliTl California with a full bar was a virtual eold Ynaw i VSSsJ Amine for its owner. Alcohol sales are much more profitable than food sales, restaurateurs say. But Californians have changed their drinking habits in recent years; fewer are ordering cocktails before or with dinner.

Fewer still are lingering after dinner for more drinks. Tough new drunk-driving laws and a new emphasis on healthier eating styles are credited with the change. The switch has seriously eroded the value of a liquor license to a restaurant operator. Such a license used to be a very valuable asset that a restaurateur could sell at a huge profit even if the restaurant failed. According to the state Alcoholic Beverage Control Department, the estimated average selling price of an existing restaurant liquor license for hard liquor as well as beer and wine has dropped steadily in the past five years.

In 1985, the estimated average price in Los Angeles County was $37,150, according to ABC figures. The price fell to $30,000 in 1986, $28,220 in 1987, $25,777 in 1988 and $22,737 in 1989. That represents a 63 decline in the past five years. The state issues only a handful of new liquor licenses to restaurants each year, which is why the transfer of existing licenses became such a hot business until recently. Just 25 new licenses have been awarded in Los Angeles County each year for nearly a decade the maximum allowed by a state law that limits the number of licenses to the MICHAEL HAERINO For The Times Tom Kaplan of Spago: "We have definitely reached a saturation point in Los Angeles." amount of population growth.

But even demand for new licenses, which are awarded in a lottery system, has fallen in Los Angeles. According to state figures, 314 people applied for the 25 new licenses handed out in 1985. That fell to 244 in 1986, 208 in 1987, 189 in 1988 and 161 in 1989. "I think it's part of the trend away from leisurely dining in Southern California," says restaurant broker Orris Abbott. "Having a liquor license at a restaurant is inviting people to come in, sit down, spend some time and enjoy.

Most of us rarely have time to do that any more." HARRY ANDERSON MIKESERGIEFF For The Times Ron Salisbury, owner of El Cholo: "I'm hearing a lot about dining out being too.